SOUTHWEST AIRLINES REPORTS SECOND QUARTER 2025 RESULTS
Southwest Airlines (NYSE:LUV) reported Q2 2025 financial results with net income of $213 million ($0.39 per diluted share), or $230 million excluding special items ($0.43 per diluted share). The company returned $1.6 billion to shareholders through dividends and share repurchases.
Key developments include implementing bag fees and basic economy products, with financial benefits exceeding expectations. The Board authorized a new $2.0 billion share repurchase program. Southwest updated its full year 2025 EBIT guidance to $600-800 million and maintains targets of $1.8 billion EBIT contribution from initiatives in 2025 and $4.3 billion in 2026.
Q2 operating revenues decreased 1.5% to $7.2 billion, with passenger revenues down 1.3% to $6.6 billion. The company completed retrofits of over 220 aircraft for extra legroom seating and will begin selling assigned and premium seating on July 29, 2025, for travel starting January 2026.
Southwest Airlines (NYSE:LUV) ha comunicato i risultati finanziari del secondo trimestre 2025 con un utile netto di 213 milioni di dollari (0,39 dollari per azione diluita), o 230 milioni di dollari esclusi gli elementi straordinari (0,43 dollari per azione diluita). La società ha restituito 1,6 miliardi di dollari agli azionisti attraverso dividendi e riacquisti di azioni.
Tra gli sviluppi principali vi sono l'introduzione di tariffe per i bagagli e prodotti di economia base, con benefici finanziari superiori alle aspettative. Il Consiglio di Amministrazione ha autorizzato un nuovo programma di riacquisto azionario da 2,0 miliardi di dollari. Southwest ha aggiornato le previsioni di EBIT per l'intero anno 2025 a 600-800 milioni di dollari e mantiene gli obiettivi di un contributo EBIT di 1,8 miliardi di dollari dalle iniziative nel 2025 e 4,3 miliardi di dollari nel 2026.
I ricavi operativi del secondo trimestre sono diminuiti dell'1,5% a 7,2 miliardi di dollari, con i ricavi passeggeri in calo dell'1,3% a 6,6 miliardi di dollari. La società ha completato la riconfigurazione di oltre 220 aeromobili con posti a maggiore spazio per le gambe e inizierà a vendere posti assegnati e premium dal 29 luglio 2025, per viaggi a partire da gennaio 2026.
Southwest Airlines (NYSE:LUV) reportó los resultados financieros del segundo trimestre de 2025 con un ingreso neto de 213 millones de dólares (0,39 dólares por acción diluida), o 230 millones de dólares excluyendo ítems especiales (0,43 dólares por acción diluida). La compañía devolvió 1,6 mil millones de dólares a los accionistas mediante dividendos y recompra de acciones.
Los desarrollos clave incluyen la implementación de tarifas por equipaje y productos de economía básica, con beneficios financieros que superaron las expectativas. La Junta autorizó un nuevo programa de recompra de acciones por 2,0 mil millones de dólares. Southwest actualizó su guía de EBIT para todo el año 2025 a 600-800 millones de dólares y mantiene objetivos de una contribución EBIT de 1,8 mil millones de dólares por iniciativas en 2025 y 4,3 mil millones en 2026.
Los ingresos operativos del segundo trimestre disminuyeron un 1,5% a 7,2 mil millones de dólares, con ingresos por pasajeros que bajaron un 1,3% a 6,6 mil millones de dólares. La compañía completó la remodelación de más de 220 aviones para asientos con mayor espacio para las piernas y comenzará a vender asientos asignados y premium el 29 de julio de 2025, para viajes a partir de enero de 2026.
Southwest Airlines (NYSE:LUV)는 2025년 2분기 재무 결과를 발표하며 순이익 2억 1,300만 달러 (희석 주당 0.39달러)을 기록했으며, 특별 항목을 제외하면 2억 3,000만 달러 (희석 주당 0.43달러)입니다. 회사는 배당금과 자사주 매입을 통해 주주에게 16억 달러를 환원했습니다.
주요 발전 사항으로는 수하물 요금과 기본 경제 상품 도입이 있으며, 재무적 이익이 기대치를 초과했습니다. 이사회는 20억 달러 규모의 신규 자사주 매입 프로그램을 승인했습니다. Southwest는 2025년 전체 EBIT 가이던스를 6억~8억 달러로 업데이트했으며, 2025년 이니셔티브로부터 18억 달러, 2026년에는 43억 달러의 EBIT 기여 목표를 유지하고 있습니다.
2분기 영업 수익은 1.5% 감소한 72억 달러였으며, 여객 수익은 1.3% 감소한 66억 달러였습니다. 회사는 220대 이상의 항공기를 추가 다리 공간 좌석으로 개조를 완료했으며, 2025년 7월 29일부터 지정 좌석 및 프리미엄 좌석 판매를 시작해 2026년 1월부터 여행에 적용할 예정입니다.
Southwest Airlines (NYSE:LUV) a publié ses résultats financiers du deuxième trimestre 2025 avec un revenu net de 213 millions de dollars (0,39 dollar par action diluée), ou 230 millions de dollars hors éléments exceptionnels (0,43 dollar par action diluée). La société a reversé 1,6 milliard de dollars aux actionnaires via des dividendes et des rachats d'actions.
Les développements clés incluent la mise en place de frais pour les bagages et de produits en économie de base, avec des bénéfices financiers supérieurs aux attentes. Le conseil d'administration a autorisé un nouveau programme de rachat d'actions de 2,0 milliards de dollars. Southwest a mis à jour ses prévisions d'EBIT pour l'année complète 2025 à 600-800 millions de dollars et maintient des objectifs de contribution EBIT de 1,8 milliard de dollars issus des initiatives en 2025 et de 4,3 milliards en 2026.
Les revenus d'exploitation du deuxième trimestre ont diminué de 1,5 % à 7,2 milliards de dollars, avec des revenus passagers en baisse de 1,3 % à 6,6 milliards de dollars. La société a achevé la rénovation de plus de 220 avions avec des sièges offrant plus d'espace pour les jambes et commencera à vendre des sièges attribués et premium à partir du 29 juillet 2025, pour des voyages débutant en janvier 2026.
Southwest Airlines (NYSE:LUV) meldete die Finanzergebnisse für das zweite Quartal 2025 mit einem Nettoeinkommen von 213 Millionen US-Dollar (0,39 US-Dollar je verwässerter Aktie) bzw. 230 Millionen US-Dollar ohne Sondereffekte (0,43 US-Dollar je verwässerter Aktie). Das Unternehmen gab 1,6 Milliarden US-Dollar an die Aktionäre zurück durch Dividenden und Aktienrückkäufe.
Wesentliche Entwicklungen umfassen die Einführung von Gepäckgebühren und Basic-Economy-Produkten, deren finanzielle Vorteile die Erwartungen übertrafen. Der Vorstand genehmigte ein neues Aktienrückkaufprogramm im Umfang von 2,0 Milliarden US-Dollar. Southwest aktualisierte die EBIT-Prognose für das Gesamtjahr 2025 auf 600-800 Millionen US-Dollar und hält an Zielen von 1,8 Milliarden US-Dollar EBIT-Beitrag aus Initiativen 2025 und 4,3 Milliarden US-Dollar im Jahr 2026 fest.
Die operativen Erlöse im zweiten Quartal sanken um 1,5 % auf 7,2 Milliarden US-Dollar, die Passagiereinnahmen gingen um 1,3 % auf 6,6 Milliarden US-Dollar zurück. Das Unternehmen hat über 220 Flugzeuge mit Sitzen mit mehr Beinfreiheit umgerüstet und wird ab dem 29. Juli 2025 zugewiesene und Premium-Sitze für Reisen ab Januar 2026 verkaufen.
- New $2.0 billion share repurchase program authorized
- Bag fee implementation exceeded financial expectations
- Returned $1.6 billion to shareholders in Q2 2025
- Fuel efficiency improved 2.9% year-over-year
- Maintains confidence in achieving $1.8B EBIT target from initiatives in 2025
- Strong liquidity position with $3.8B in cash and investments plus $1.0B credit line
- Q2 operating revenues decreased 1.5% year-over-year to $7.2 billion
- Operating expenses increased 0.9% year-over-year to $7.0 billion
- CASM-X increased 4.7% year-over-year due to inflationary pressures
- Basic economy implementation temporarily reduced website conversion rates
- Passenger revenues declined 1.3% year-over-year to $6.6 billion
Insights
Southwest's Q2 profit of $213M shows progress with initiatives like bag fees, yet faces revenue challenges amid signs of improving demand.
Southwest Airlines reported $213 million in net income (
The company's transformation strategy is gaining traction, particularly with the introduction of bag fees that are exceeding financial expectations. Southwest has also rolled out a basic economy product structure, laying groundwork for future revenue segmentation. However, the initial implementation caused temporary friction in the booking process, impacting Q2 RASM by nearly
On the cost side, CASM-X increased
Notably, Southwest has completely exited its fuel hedging program, terminating remaining contracts that were scheduled through 2027, receiving
Management's confidence in its transformation plan is evident in its capital allocation decisions. The company returned
For forward guidance, Southwest expects Q3 2025 unit revenues to range between
- Net income of
, or$213 million income per diluted share$0.39 - Net income, excluding special items1, of
, or$230 million income per diluted share$0.43 - Returned
to Shareholders through a combination of share repurchases and dividends$1.6 billion - Launched bag fees with financial benefit exceeding expectations and no negative operational impact
- Rolled out new basic economy product structure, laying the foundation for future product differentiation
- Maintaining targets of
full year 2025 and$1.8 billion full year 2026 incremental earnings before interest and taxes, excluding special items ("EBIT"2) contribution from slate of initiatives$4.3 billion - While early, recent industry demand shows signs of improvement off of depressed second quarter 2025 levels, which combined with moderated capacity across the industry and Southwest-specific initiatives, creates a constructive backdrop for the second half of the year
- Providing updated full year 2025 guidance for EBIT2 in the range of
to$600 million $800 million - Board of Directors authorized a new
share repurchase program expected to be completed over a period of up to two years$2.0 billion
Bob
Guidance and Outlook:
The following tables provide select financial guidance for third quarter 2025 and full year 2025, and select full year 2025 and 2026 targets.
3Q 2025 Estimation | |||||||||||||
RASM (a), year-over-year | Down | ||||||||||||
ASMs (b), year-over-year | ~Flat | ||||||||||||
Fuel cost per gallon3 | |||||||||||||
ASMs per gallon (fuel efficiency) | 82 to 84 | ||||||||||||
CASM-X (c), year-over-year1,4 | Up | ||||||||||||
Scheduled debt repayments (millions) | |||||||||||||
Interest expense (millions) | |||||||||||||
| |||||||||||||
2025 Estimation | |||||||||||||
EBIT2 (millions) | |||||||||||||
| |||||||||||||
2025 Target | 2026 Target | ||||||||||||
EBIT2 contribution from initiatives (billions) |
|
(a) Operating revenue per available seat mile ("RASM" or "unit revenues"). |
(b) Available seat miles ("ASMs" or "capacity"). |
(c) Operating expenses per available seat mile, excluding fuel and oil expense, special items, and profit sharing ("CASM-X" or "unit costs"). |
Key Initiative Highlights:
- Introduced bag fees with initial financial benefit exceeding expectations
- Implemented basic economy product, laying the foundation for future product differentiation
- Reintroduced flight credit expiration
- Announced partnership with China Airlines and three new gateways for Icelandair partnership
- Completed retrofits of more than 220 aircraft for extra legroom seating
- Announced sell date of July 29, 2025, for assigned and premium seating, for travel beginning January 27, 2026
- Announced intention to commence new service at Cyril E. King International Airport on
St. Thomas beginning early next year - Completed the September 2024
share repurchase authorization in second quarter 2025, repurchasing the remaining$2.5 billion through an accelerated share repurchase program. Final settlement of shares purchased through the second quarter 2025 accelerated share repurchase program is expected to occur by the end of July 2025$1.5 billion
Revenue Results and Outlook:
- Second quarter 2025 passenger revenues were
, a 1.3 percent decrease, year-over-year$6.6 billion - Second quarter 2025 operating revenues were
, a 1.5 percent decrease, year-over-year$7.2 billion - Second quarter 2025 RASM decreased 3.1 percent on capacity up 1.6 percent, both year-over-year—in line with the Company's previous guidance range
Domestic leisure travel stabilized during second quarter 2025, with recent trends showing signs of improvement, and the Company once again outperformed its large industry peers on domestic unit revenue. The Company's portfolio of recently implemented initiatives provided incremental revenue in second quarter 2025 that is expected to ramp up as the year progresses.
Following the May 28, 2025 launch of its basic economy product, the Company experienced a temporary reduction in the conversion rate of basic economy on its website. The Company took swift action and refined its booking flow and marketing approach in an effort to reduce friction, as well as offer additional promotional activity, and bookings and conversion rates quickly returned to expected levels. This resulted in an impact to second quarter 2025 year-over-year RASM of nearly one-half point, and an estimated impact to third quarter 2025 year-over-year RASM of approximately one point.
The Company expects third quarter 2025 unit revenues to be in the range of down 2 percent to up 2 percent on roughly flat capacity, both on a year-over-year basis. This guidance range assumes a modest sequential improvement in demand. Company-specific initiatives provide a unique offset to the broader industry revenue impact, and will continue to accelerate throughout third quarter 2025. Third quarter 2024 RASM included approximately one point of positive year-over-year impact from the CrowdStrike industry event.
The Company has provided full year 2025 EBIT2 guidance, as well as a reconciliation to its previous full year guide included in the materials accompanying this release. The Company's EBIT2 guidance assumes further sequential improvement from third quarter 2025, driven by accelerating incremental revenue from Company-specific initiatives, the recovery of the temporary basic economy optimization impact, and anticipated improvement in domestic leisure travel trends.
Non-Fuel Costs and Outlook:
- Second quarter 2025 operating expenses increased 0.9 percent, year-over-year, to
$7.0 billion - Second quarter 2025 operating expenses, excluding fuel and oil expense, special items, and profit sharing1, increased 6.4 percent, year-over-year
- Second quarter 2025 CASM-X increased 4.7 percent, year-over-year—in line with the Company's previous guidance range
The Company's second quarter 2025 CASM-X year-over-year increase included an approximate one-half point headwind from a non-cash mark-to-market adjustment for nonqualified deferred compensation plans which was driven by recent strong stock market performance.
The Company continues to expect to achieve its
Fuel Costs and Outlook:
- Second quarter 2025 fuel costs were
per gallon—slightly above the Company's previous guidance range$2.32 - Second quarter 2025 fuel efficiency improved 2.9 percent, year-over-year, primarily due to operating more Boeing 737-8 ("-8") aircraft, the Company's most fuel-efficient aircraft, as a percentage of its fleet
During second quarter 2025, the Company terminated its remaining portfolio of fuel hedging contracts, which were scheduled to settle through 2027, to effectively close its fuel hedging portfolio. The cash proceeds from this transaction totaled approximately
Capacity, Fleet, and Capital Spending:
- Second quarter 2025 capacity increased 1.6 percent, year-over-year—in line with the Company's previous guidance range
- The Company received 17 -8 aircraft and retired seven Boeing 737-700 aircraft in second quarter 2025, ending the quarter with 810 aircraft
- Second quarter 2025 capital expenditures were
, driven primarily by aircraft-related capital spending, as well as technology, facilities, and operational investments$635 million
The Company previously announced proactive capacity reductions in the second half of 2025 in an effort to better accommodate the current demand environment and capture associated cost savings, and continues to expect full year 2025 capacity to be up roughly 1 percent, year-over-year. This modest growth is driven entirely by an increase in aircraft utilization provided by redeye flying and turn time reduction initiatives.
The Company has updated its fleet planning assumptions to 47 Boeing -8 aircraft deliveries in 2025, from its prior estimate of 38, as The Boeing Company ("Boeing") continues to ramp up production. With these incremental deliveries, the Company now expects to retire approximately 55 aircraft in 2025, compared with its previous estimate of approximately 50 retirements this year. This includes the sale of five Boeing 737-800 ("-800") aircraft expected to occur in the second half of 2025. The Company continues to expect additional new aircraft deliveries to facilitate the retirement of aircraft from its existing fleet in support of its fleet monetization and capital allocation strategies.
The Company continues to expect its 2025 capital spending to be in the range of
Liquidity and Capital Deployment:
- The Company paid off
of convertible notes in cash and prepaid$1.6 billion for the first tranche of the Payroll Support Program notes in second quarter 2025$976 million - The Company ended second quarter 2025 with
in cash and cash equivalents and short-term investments, and a fully available revolving credit line of$3.8 billion $1.0 billion - The Company returned
to its Shareholders during second quarter 2025, comprised of$1.6 billion of dividends and$103 million of share repurchases$1.5 billion
The Company completed its September 2024
The Company's capital allocation framework supports its continued commitment to a strong and efficient investment-grade balance sheet. Moving forward, the Company will target liquidity of approximately
Supplemental Information:
The Company has provided a summary on progress against initiative development and detail on its full year 2025 EBIT2 guidance on the Investor Relations website at https://www.southwestairlinesinvestorrelations.com.
Conference Call:
The Company will discuss its second quarter 2025 results on a conference call at 12:30 p.m. Eastern Time on July 24, 2025. To listen to a live broadcast of the conference call, please go to
https://www.southwestairlinesinvestorrelations.com.
Footnotes
1See Note Regarding Use of Non-GAAP Financial Measures for additional information on special items. In addition, information regarding special items and economic results is included in the accompanying table Reconciliation of Reported Amounts to Non-GAAP Measures (also referred to as "excluding special items").
2Earnings before interest and taxes, excluding special items ("EBIT"), a non-GAAP financial measure, also excludes gains or losses from fleet transactions. Projections do not reflect the potential impact of special items because the Company cannot reliably predict or estimate those items or expenses or their impact to its financial statements in future periods. Accordingly, the Company believes a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures for these projected results is not meaningful or available without unreasonable effort.
3Based on market prices as of July 17, 2025. Fuel cost per gallon includes fuel taxes and fuel hedging net premium expense of
4Projections do not reflect the potential impact of fuel and oil expense, special items, and profit sharing because the Company cannot reliably predict or estimate those items or expenses or their impact to its financial statements in future periods, especially considering the significant volatility of the fuel and oil expense line item. Accordingly, the Company believes a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures for these projected results is not meaningful or available without unreasonable effort.
5Leverage, adjusted debt, and adjusted EBITDAR are each non-GAAP financial measures. Leverage is calculated as adjusted debt divided by trailing twelve month adjusted EBITDAR. Adjusted EBITDAR is calculated as earnings before interest and taxes, and non-operating other (gains) losses, net, excluding special items, and adjusted by adding depreciation and amortization and the fixed portion of operating lease expense ("adjusted EBITDAR"). Adjusted debt includes current and long-term debt, finance lease obligations, and operating lease liabilities (including fleet, ground, and other). While the Company has provided reconciliations of historical leverage, adjusted debt, and adjusted EBITDAR below, it does not provide reconciliations of projections of these measures as the Company believes a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures for these projected results is not meaningful or available without unreasonable effort.
Cautionary Statement Regarding Forward-Looking Statements
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Specific forward-looking statements include, without limitation, statements related to (i) the Company's initiatives, strategic priorities and focus areas, goals, and opportunities, including with respect to assigned and premium seating, cost reductions, the Company's transformational plan, commercial offering, product differentiation, bag fees, financial performance, providing value for Customers and Shareholders, and driving cost efficiencies; (ii) the Company's financial and operational outlook, expectations, goals, plans, and projected results of operations, including with respect to its initiatives, and including factors and assumptions underlying the Company's expectations and projections; (iii) the Company's expectations with respect to passenger demand and bookings; (iv) the Company's capacity plans and expectations; (v) the Company's plans and expectations with respect to share repurchases and other shareholder returns; (vi) the Company's expectations with respect to fuel costs and fuel efficiency, and the Company's related management of risks associated with changing jet fuel prices, including factors underlying the Company's expectations; (vii) the Company's plans, estimates, and assumptions related to repayment of debt obligations, interest expense, and capital spending, including factors and assumptions underlying the Company's expectations and projections; (viii) the Company's plans and the Company's network plans and expectations; (ix) the Company's plans and expectations with respect to fleet transactions; (x) the Company's plans and expectations with respect to redeye flying and reducing turn times; (xi) the Company's fleet plans and expectations, including with respect to its fleet order book, fleet utilization, fleet retrofits, fleet modernization, fleet transactions, flexibility, and expected fleet deliveries and retirements, and including factors and assumptions underlying the Company's plans and expectations; (xii) the Company's plans and expectations with respect to its balance sheet; and (xiii) the Company's plans, expectations, and targets with respect to liquidity and leverage. These forward-looking statements are based on the Company's current estimates, intentions, beliefs, expectations, goals, strategies, and projections for the future and are not guarantees of future performance. Forward-looking statements involve risks, uncertainties, assumptions, and other factors that are difficult to predict and that could cause actual results to vary materially from those expressed in or indicated by them. Factors include, among others, (i) the impact of fears or actual outbreaks of diseases, extreme or severe weather and natural disasters, actions of competitors (including, without limitation, pricing, scheduling, capacity, and network decisions, and consolidation and alliance activities), governmental actions, consumer perception, consumer uncertainties with respect to trade policies (including the imposition of tariffs), economic conditions, banking conditions, fears or actual acts of terrorism or war, sociodemographic trends, and other factors beyond the Company's control, on consumer behavior and the Company's results of operations and business decisions, plans, strategies, and results; (ii) the Company's ability to timely and effectively implement, transition, operate, and maintain the necessary information technology systems and infrastructure to support its operations and initiatives, including with respect to revenue management and assigned and premium seating; (iii) consumer behavior and response with respect to the Company's new commercial products and policies; (iv) the impact of fuel price changes, fuel price volatility, and fuel availability on the Company's business plans and results of operations; (v) the Company's dependence on The Boeing Company ("Boeing") and Boeing suppliers with respect to the Company's aircraft deliveries, Boeing MAX 7 aircraft certifications, fleet and capacity plans, operations, maintenance, strategies, and goals; (vi) the Company's dependence on the Federal Aviation Administration with respect to, among other things, the certification of the Boeing MAX 7 aircraft; (vii) the Company's dependence on other third parties, in particular with respect to its technology plans, its plans and expectations related to revenue management, online travel agencies, operational reliability, fuel supply, maintenance, Global Distribution Systems, environmental sustainability, and the impact on the Company's operations and results of operations of any third party delays or nonperformance; (viii) the Company's ability to timely and effectively prioritize its initiatives and focus areas and related expenditures; (ix) the impact of labor matters on the Company's business decisions, plans, strategies, and results; (x) the impact of governmental regulations and other governmental actions, as well as the Company's ability to obtain any required governmental approvals, on the Company's business plans, results, and operations; (xi) the Company's ability to obtain and maintain adequate infrastructure and equipment to support its operations and initiatives; (xii) the Company's dependence on its workforce, including its ability to employ and retain sufficient numbers of qualified Employees with appropriate skills and expertise to effectively and efficiently maintain its operations and execute the Company's plans, strategies, and initiatives; (xiii) the cost and effects of the actions of activist shareholders; and (xiv) other factors, as described in the Company's filings with the Securities and Exchange Commission, including the detailed factors discussed under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
SW-QFS
Southwest Airlines Co. |
Condensed Consolidated Statement of Income |
(in millions, except per share amounts) |
(unaudited) |
Three months ended | Six months ended | ||||||||||||||||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||||||||||||||
2025 | 2024 | Percent Change | 2025 | 2024 | Percent Change | ||||||||||||||||||||||||||||||
OPERATING REVENUES: | |||||||||||||||||||||||||||||||||||
Passenger | $ | 6,627 | $ | 6,712 | (1.3) | $ | 12,438 | $ | 12,424 | 0.1 | |||||||||||||||||||||||||
Freight | 44 | 45 | (2.2) | 86 | 87 | (1.1) | |||||||||||||||||||||||||||||
Other | 573 | 597 | (4.0) | 1,148 | 1,172 | (2.0) | |||||||||||||||||||||||||||||
Total operating revenues | 7,244 | 7,354 | (1.5) | 13,672 | 13,683 | (0.1) | |||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||
OPERATING EXPENSES: | |||||||||||||||||||||||||||||||||||
Salaries, wages, and benefits | 3,262 | 2,999 | 8.8 | 6,364 | 5,939 | 7.2 | |||||||||||||||||||||||||||||
Fuel and oil | 1,326 | 1,599 | (17.1) | 2,575 | 3,130 | (17.7) | |||||||||||||||||||||||||||||
Maintenance materials and repairs | 331 | 350 | (5.4) | 623 | 711 | (12.4) | |||||||||||||||||||||||||||||
Landing fees and airport rentals | 567 | 511 | 11.0 | 1,090 | 975 | 11.8 | |||||||||||||||||||||||||||||
Depreciation and amortization | 400 | 404 | (1.0) | 795 | 812 | (2.1) | |||||||||||||||||||||||||||||
Other operating expenses | 1,133 | 1,093 | 3.7 | 2,223 | 2,110 | 5.4 | |||||||||||||||||||||||||||||
Total operating expenses | 7,019 | 6,956 | 0.9 | 13,670 | 13,677 | (0.1) | |||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||
OPERATING INCOME | 225 | 398 | (43.5) | 2 | 6 | (66.7) | |||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||
NON-OPERATING EXPENSES (INCOME): | |||||||||||||||||||||||||||||||||||
Interest expense | 39 | 63 | (38.1) | 85 | 128 | (33.6) | |||||||||||||||||||||||||||||
Capitalized interest | (13) | (8) | 62.5 | (24) | (15) | 60.0 | |||||||||||||||||||||||||||||
Interest income | (54) | (130) | (58.5) | (138) | (271) | (49.1) | |||||||||||||||||||||||||||||
Other (gains) losses, net | (27) | (5) | n.m. | (9) | (17) | (47.1) | |||||||||||||||||||||||||||||
Total non-operating income | (55) | (80) | (31.3) | (86) | (175) | (50.9) | |||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||
INCOME BEFORE INCOME TAXES | 280 | 478 | (41.4) | 88 | 181 | (51.4) | |||||||||||||||||||||||||||||
PROVISION FOR INCOME TAXES | 67 | 111 | (39.6) | 24 | 44 | (45.5) | |||||||||||||||||||||||||||||
NET INCOME | $ | 213 | $ | 367 | (42.0) | $ | 64 | $ | 137 | (53.3) | |||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||
NET INCOME PER SHARE: | |||||||||||||||||||||||||||||||||||
Basic | $ | 0.40 | $ | 0.61 | (34.4) | $ | 0.11 | $ | 0.23 | (52.2) | |||||||||||||||||||||||||
Diluted | $ | 0.39 | $ | 0.58 | (32.8) | $ | 0.11 | $ | 0.23 | (52.2) | |||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING: | |||||||||||||||||||||||||||||||||||
Basic | 538 | 599 | (10.2) | 561 | 598 | (6.2) | |||||||||||||||||||||||||||||
Diluted | 541 | 643 | (15.9) | 564 | 643 | (12.3) | |||||||||||||||||||||||||||||
Southwest Airlines Co. |
Reconciliation of Reported Amounts to Non-GAAP Financial Measures (excluding special items) |
(See Note Regarding Use of Non-GAAP Financial Measures) |
(in millions, except per share and per ASM amounts)(unaudited) |
Three months ended | Six months ended | ||||||||||||||||||||||||||||||||||
June 30, | Percent | June 30, | Percent | ||||||||||||||||||||||||||||||||
2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||||||||||||
Fuel and oil expense, unhedged | $ | 1,290 | $ | 1,581 | $ | 2,502 | $ | 3,091 | |||||||||||||||||||||||||||
Add: Premium cost of fuel contracts designated as hedges (a) | 36 | 40 | 73 | 79 | |||||||||||||||||||||||||||||||
Deduct: Fuel hedge gains included in Fuel and oil expense, net | — | (22) | — | (40) | |||||||||||||||||||||||||||||||
Fuel and oil expense, as reported | $ | 1,326 | $ | 1,599 | (17.1) | $ | 2,575 | $ | 3,130 | (17.7) | |||||||||||||||||||||||||
Add: Fuel hedge contracts settling in the current period, but for which losses | — | 1 | — | 2 | |||||||||||||||||||||||||||||||
Deduct: Premium benefit of fuel contracts not designated as hedges | — | (1) | — | (1) | |||||||||||||||||||||||||||||||
Fuel and oil expense, excluding special items (economic) | $ | 1,326 | $ | 1,599 | (17.1) | $ | 2,575 | $ | 3,131 | (17.8) | |||||||||||||||||||||||||
Total operating expenses, as reported | $ | 7,019 | $ | 6,956 | $ | 13,670 | $ | 13,677 | |||||||||||||||||||||||||||
Deduct: Labor contract adjustment | — | — | — | (9) | |||||||||||||||||||||||||||||||
Add: Fuel hedge contracts settling in the current period, but for which losses | — | 1 | — | 2 | |||||||||||||||||||||||||||||||
Deduct: Premium benefit of fuel contracts not designated as hedges | — | (1) | — | (1) | |||||||||||||||||||||||||||||||
Deduct: Impairment of long-lived assets | (8) | — | (8) | — | |||||||||||||||||||||||||||||||
Deduct: Litigation accruals | — | — | (19) | (7) | |||||||||||||||||||||||||||||||
Deduct: Transformation costs | (12) | — | (26) | — | |||||||||||||||||||||||||||||||
Deduct: Severance and related costs (b) | — | — | (62) | — | |||||||||||||||||||||||||||||||
Deduct: Professional advisory fees | — | (7) | — | (7) | |||||||||||||||||||||||||||||||
Total operating expenses, excluding special items | $ | 6,999 | $ | 6,949 | 0.7 | $ | 13,555 | $ | 13,655 | (0.7) | |||||||||||||||||||||||||
Deduct: Fuel and oil expense, excluding special items (economic) | (1,326) | (1,599) | (2,575) | (3,131) | |||||||||||||||||||||||||||||||
Operating expenses, excluding Fuel and oil expense and special items | $ | 5,673 | $ | 5,350 | 6.0 | $ | 10,980 | $ | 10,524 | 4.3 | |||||||||||||||||||||||||
Deduct: Profit-sharing expense | (14) | (31) | (14) | (31) | |||||||||||||||||||||||||||||||
Operating expenses, excluding Fuel and oil expense, special items, | $ | 5,659 | $ | 5,319 | 6.4 | $ | 10,966 | $ | 10,493 | 4.5 | |||||||||||||||||||||||||
Operating income, as reported | $ | 225 | $ | 398 | $ | 2 | $ | 6 | |||||||||||||||||||||||||||
Add: Labor contract adjustment | — | — | — | 9 | |||||||||||||||||||||||||||||||
Deduct: Fuel hedge contracts settling in the current period, but for which losses | — | (1) | — | (2) | |||||||||||||||||||||||||||||||
Add: Premium benefit of fuel contracts not designated as hedges | — | 1 | — | 1 | |||||||||||||||||||||||||||||||
Add: Impairment of long-lived assets | 8 | — | 8 | — | |||||||||||||||||||||||||||||||
Add: Litigation accruals | — | — | 19 | 7 | |||||||||||||||||||||||||||||||
Add: Transformation costs | 12 | — | 26 | — | |||||||||||||||||||||||||||||||
Add: Severance and related costs (b) | — | — | 62 | — | |||||||||||||||||||||||||||||||
Add: Professional advisory fees | — | 7 | — | 7 | |||||||||||||||||||||||||||||||
Operating income, excluding special items | $ | 245 | $ | 405 | (39.5) | $ | 117 | $ | 28 | 317.9 | |||||||||||||||||||||||||
Other gains, net, as reported | $ | (27) | $ | (5) | $ | (9) | $ | (17) | |||||||||||||||||||||||||||
Deduct: Mark-to-market impact from fuel contracts settling in future periods | — | (2) | — | (3) | |||||||||||||||||||||||||||||||
Add: Premium benefit of fuel contracts not designated as hedges | — | 1 | — | 1 | |||||||||||||||||||||||||||||||
Other gains, net, excluding special items | $ | (27) | $ | (6) | n.m. | $ | (9) | $ | (19) | (52.6) | |||||||||||||||||||||||||
Income before income taxes, as reported | $ | 280 | $ | 478 | $ | 88 | $ | 181 | |||||||||||||||||||||||||||
Add: Labor contract adjustment | — | — | — | 9 | |||||||||||||||||||||||||||||||
Deduct: Fuel hedge contracts settling in the current period, but for which losses | — | (1) | — | (2) | |||||||||||||||||||||||||||||||
Add: Mark-to-market impact from fuel contracts settling in future periods | — | 2 | — | 3 | |||||||||||||||||||||||||||||||
Add: Litigation accruals | — | — | 19 | 7 | |||||||||||||||||||||||||||||||
Add: Transformation costs | 12 | — | 26 | — | |||||||||||||||||||||||||||||||
Add: Severance and related costs (b) | — | — | 62 | — | |||||||||||||||||||||||||||||||
Add: Professional advisory fees | — | 7 | — | 7 | |||||||||||||||||||||||||||||||
Add: Impairment of long-lived assets | 8 | — | 8 | — | |||||||||||||||||||||||||||||||
Income before income taxes, excluding special items | $ | 300 | $ | 486 | (38.3) | $ | 203 | $ | 205 | (1.0) | |||||||||||||||||||||||||
Provision for income taxes, as reported | $ | 67 | $ | 111 | $ | 24 | $ | 44 | |||||||||||||||||||||||||||
Add: Net income tax impact of fuel and special items (c) | 3 | 5 | 26 | 9 | |||||||||||||||||||||||||||||||
Provision for income taxes, net, excluding special items | $ | 70 | $ | 116 | (39.7) | $ | 50 | $ | 53 | (5.7) | |||||||||||||||||||||||||
Net income, as reported | $ | 213 | $ | 367 | $ | 64 | $ | 137 | |||||||||||||||||||||||||||
Add: Labor contract adjustment | — | — | — | 9 | |||||||||||||||||||||||||||||||
Deduct: Fuel hedge contracts settling in the current period, but for which losses | — | (1) | — | (2) | |||||||||||||||||||||||||||||||
Add: Mark-to-market impact from fuel contracts settling in future periods | — | 2 | — | 3 | |||||||||||||||||||||||||||||||
Add: Litigation accruals | — | — | 19 | 7 | |||||||||||||||||||||||||||||||
Add: Transformation costs | 12 | — | 26 | — | |||||||||||||||||||||||||||||||
Add: Severance and related costs (b) | — | — | 62 | — | |||||||||||||||||||||||||||||||
Add: Professional advisory fees | — | 7 | — | 7 | |||||||||||||||||||||||||||||||
Add: Impairment of long-lived assets | 8 | — | 8 | — | |||||||||||||||||||||||||||||||
Deduct: Net income tax impact of special items (c) | (3) | (5) | (26) | (9) | |||||||||||||||||||||||||||||||
Net income, excluding special items | $ | 230 | $ | 370 | (37.8) | $ | 153 | $ | 152 | 0.7 | |||||||||||||||||||||||||
Net income per share, diluted, as reported | $ | 0.39 | $ | 0.58 | $ | 0.11 | $ | 0.23 | |||||||||||||||||||||||||||
Add: Impact of special items | 0.05 | 0.01 | 0.21 | 0.03 | |||||||||||||||||||||||||||||||
Deduct: Net income tax impact of special items (c) | (0.01) | (0.01) | (0.05) | (0.01) | |||||||||||||||||||||||||||||||
Net income per share, diluted, excluding special items | $ | 0.43 | $ | 0.58 | (25.9) | $ | 0.27 | $ | 0.25 | 8.0 | |||||||||||||||||||||||||
Operating expenses per ASM (cents) | ¢ | 14.94 | ¢ | 15.04 | ¢ | 15.46 | ¢ | 15.46 | |||||||||||||||||||||||||||
Deduct: Impact of special items | (0.04) | (0.02) | (0.13) | (0.02) | |||||||||||||||||||||||||||||||
Deduct: Fuel and oil expense divided by ASMs | (2.83) | (3.46) | (2.91) | (3.54) | |||||||||||||||||||||||||||||||
Deduct: Profit-sharing expense divided by ASMs | (0.03) | (0.06) | (0.02) | (0.04) | |||||||||||||||||||||||||||||||
Operating expenses per ASM, excluding Fuel and oil expense, special items, | ¢ | 12.04 | ¢ | 11.50 | 4.7 | ¢ | 12.40 | ¢ | 11.86 | 4.6 |
|
(a) Includes amounts reclassified from Accumulated Other Comprehensive Income associated with hedges previously terminated. |
(b) Represents Employee severance payments and related professional fees resulting from the workforce reduction in February 2025 ( |
(c) Tax amounts for each individual special item are calculated at the Company's effective rate for the applicable period and totaled in this line item. |
Southwest Airlines Co. |
| |||||||||||||||||||||||||||||||||||
Three months ended | Six months ended | ||||||||||||||||||||||||||||||||||
June 30, | Percent | June 30, | Percent | ||||||||||||||||||||||||||||||||
2025 | 2024 | Change | 2025 | 2024 | Change | ||||||||||||||||||||||||||||||
Revenue passengers carried (000s) | 35,507 | 37,509 | (5.3) | 65,497 | 70,381 | (6.9) | |||||||||||||||||||||||||||||
Enplaned passengers (000s) | 44,385 | 47,267 | (6.1) | 81,524 | 88,164 | (7.5) | |||||||||||||||||||||||||||||
Revenue passenger miles (RPMs) (in millions) (a) | 36,885 | 38,221 | (3.5) | 67,513 | 71,308 | (5.3) | |||||||||||||||||||||||||||||
Available seat miles (ASMs) (in millions) (b) | 46,996 | 46,250 | 1.6 | 88,427 | 88,497 | (0.1) | |||||||||||||||||||||||||||||
Load factor (c) | 78.5 | % | 82.6 | % | (4.1) pts. | 76.3 | % | 80.6 | % | (4.3) pts. | |||||||||||||||||||||||||
Average length of passenger haul (miles) | 1,039 | 1,019 | 2.0 | 1,031 | 1,013 | 1.8 | |||||||||||||||||||||||||||||
Average aircraft stage length (miles) | 786 | 766 | 2.6 | 779 | 760 | 2.5 | |||||||||||||||||||||||||||||
Trips flown | 367,952 | 375,749 | (2.1) | 699,838 | 725,728 | (3.6) | |||||||||||||||||||||||||||||
Seats flown (000s) (d) | 59,265 | 59,775 | (0.9) | 112,502 | 115,469 | (2.6) | |||||||||||||||||||||||||||||
Seats per trip (e) | 161.1 | 159.1 | 1.3 | 160.8 | 159.1 | 1.1 | |||||||||||||||||||||||||||||
Average passenger fare | $ | 186.65 | $ | 178.94 | 4.3 | $ | 189.90 | $ | 176.52 | 7.6 | |||||||||||||||||||||||||
Passenger revenue yield per RPM (cents) (f) | 17.97 | 17.56 | 2.3 | 18.42 | 17.42 | 5.7 | |||||||||||||||||||||||||||||
RASM (cents) (g) | 15.41 | 15.90 | (3.1) | 15.46 | 15.46 | — | |||||||||||||||||||||||||||||
PRASM (cents) (h) | 14.10 | 14.51 | (2.8) | 14.07 | 14.04 | 0.2 | |||||||||||||||||||||||||||||
CASM (cents) (i) | 14.94 | 15.04 | (0.7) | 15.46 | 15.46 | — | |||||||||||||||||||||||||||||
CASM, excluding Fuel and oil expense (cents) | 12.11 | 11.58 | 4.6 | 12.55 | 11.92 | 5.3 | |||||||||||||||||||||||||||||
CASM, excluding special items (cents) | 14.89 | 15.03 | (0.9) | 15.33 | 15.43 | (0.6) | |||||||||||||||||||||||||||||
CASM, excluding Fuel and oil expense and special items (cents) | 12.07 | 11.57 | 4.3 | 12.42 | 11.89 | 4.5 | |||||||||||||||||||||||||||||
CASM, excluding Fuel and oil expense, special items, and profit sharing (cents) | 12.04 | 11.50 | 4.7 | 12.40 | 11.86 | 4.6 | |||||||||||||||||||||||||||||
Fuel costs per gallon, including fuel tax (unhedged) | $ | 2.26 | $ | 2.73 | (17.3) | $ | 2.33 | $ | 2.80 | (16.7) | |||||||||||||||||||||||||
Fuel costs per gallon, including fuel tax | $ | 2.32 | $ | 2.76 | (15.9) | $ | 2.40 | $ | 2.84 | (15.5) | |||||||||||||||||||||||||
Fuel costs per gallon, including fuel tax (economic) | $ | 2.32 | $ | 2.76 | (15.9) | $ | 2.40 | $ | 2.84 | (15.5) | |||||||||||||||||||||||||
Fuel consumed, in gallons (millions) | 570 | 577 | (1.2) | 1,071 | 1,101 | (2.7) | |||||||||||||||||||||||||||||
Active fulltime equivalent Employees | 72,242 | 74,081 | (2.5) | 72,242 | 74,081 | (2.5) | |||||||||||||||||||||||||||||
Aircraft at end of period | 810 | 817 | (0.9) | 810 | 817 | (0.9) |
|
(a) A revenue passenger mile is one paying passenger flown one mile. Also referred to as "traffic," which is a measure of demand for a given period. |
(b) An available seat mile is one seat (empty or full) flown one mile. Also referred to as "capacity," which is a measure of the space available to carry passengers in a given period. |
(c) Revenue passenger miles divided by available seat miles. |
(d) Seats flown is calculated using total number of seats available by aircraft type multiplied by the total trips flown by the same aircraft type during a particular period. |
(e) Seats per trip is calculated by dividing seats flown by trips flown. |
(f) Calculated as passenger revenue divided by revenue passenger miles. Also referred to as "yield," this is the average cost paid by a paying passenger to fly one mile, which is a measure of revenue production and fares. |
(g) RASM (unit revenue) - Operating revenue yield per ASM, calculated as operating revenue divided by available seat miles. Also referred to as "operating unit revenues," this is a measure of operating revenue production based on the total available seat miles flown during a particular period. |
(h) PRASM (Passenger unit revenue) - Passenger revenue yield per ASM, calculated as passenger revenue divided by available seat miles. Also referred to as "passenger unit revenues," this is a measure of passenger revenue production based on the total available seat miles flown during a particular period. |
(i) CASM (unit costs) - Operating expenses per ASM, calculated as operating expenses divided by available seat miles. Also referred to as "unit costs" or "cost per available seat mile," this is the average cost to fly an aircraft seat (empty or full) one mile, which is a measure of cost efficiencies. |
Southwest Airlines Co. |
Non-GAAP Return on Invested Capital (ROIC) |
(See Note Regarding Use of Non-GAAP Financial Measures) |
(in millions) |
(unaudited) |
| ||||||||||||||
Twelve months ended | Twelve months ended | |||||||||||||
June 30, 2025 | June 30, 2024 | |||||||||||||
Operating income (loss), as reported | $ | 318 | $ | (281) | ||||||||||
Breakage revenue adjustment | 116 | — | ||||||||||||
Severance and related costs | 62 | — | ||||||||||||
Voluntary Employee programs | 5 | — | ||||||||||||
TWU 555 contract adjustment | — | 9 | ||||||||||||
TWU 556 contract adjustment | — | 95 | ||||||||||||
SWAPA contract adjustment | — | 354 | ||||||||||||
Net impact from fuel contracts | (43) | 16 | ||||||||||||
Professional advisory fees | 30 | 7 | ||||||||||||
Transformation costs | 30 | — | ||||||||||||
DOT settlement | — | 107 | ||||||||||||
Litigation accruals | 19 | 7 | ||||||||||||
Impairments | 8 | — | ||||||||||||
Operating income, non-GAAP | $ | 545 | $ | 314 | ||||||||||
Net adjustment for aircraft leases (a) | 182 | 127 | ||||||||||||
Adjusted operating income, non-GAAP (A) | $ | 727 | $ | 441 | ||||||||||
| ||||||||||||||
Non-GAAP tax rate (B) | 22.6 | % | (d) | 23.8 | % | (e) | ||||||||
| ||||||||||||||
Net operating profit after-tax, NOPAT (A* (1-B) = C) | $ | 563 | $ | 336 | ||||||||||
| ||||||||||||||
Debt, including finance leases (b) | $ | 6,699 | $ | 8,008 | ||||||||||
Equity (b) | 9,718 | 10,604 | ||||||||||||
Net present value of aircraft operating leases (b) | 967 | 949 | ||||||||||||
Average invested capital | $ | 17,384 | $ | 19,561 | ||||||||||
Equity adjustment for hedge accounting (c) | 31 | (61) | ||||||||||||
Adjusted average invested capital (D) | $ | 17,415 | $ | 19,500 | ||||||||||
| ||||||||||||||
Non-GAAP ROIC, pre-tax (A/D) | 4.2 | % | 2.3 | % | ||||||||||
| ||||||||||||||
Non-GAAP ROIC, after-tax (C/D) | 3.2 | % | 1.7 | % |
|
(a) Net adjustment to reflect all aircraft in fleet as owned (i.e., the impact of eliminating aircraft rent expense and replacing with estimated depreciation expense for those same aircraft). The Company makes this adjustment to enhance comparability to other entities that have different capital structures by utilizing alternative financing decisions. |
(b) Calculated as an average of the five most recent quarter end balances or remaining obligations. The Net present value of aircraft operating leases represents the assumption that all aircraft in the Company's fleet are owned, as it reflects the remaining contractual commitments discounted at the Company's estimated incremental borrowing rate as of the time each individual lease was signed. |
(c) The Equity adjustment in the denominator adjusts for the cumulative impacts, in Accumulated other comprehensive income and Retained earnings, of gains and/or losses that will settle in future periods, including those associated with the Company's terminated fuel hedges. The current period impact of these gains and/or losses is reflected in the Net impact from fuel contracts in the numerator. |
(d) The GAAP twelve month rolling tax rate as of June 30, 2025, was 22.3 percent, and the Non-GAAP twelve month rolling tax rate was 22.6 percent. See Note Regarding Use of Non-GAAP Financial Measures for additional information. |
(e) The GAAP twelve month rolling tax rate as of June 30, 2024, was 41.0 percent, and the Non-GAAP twelve month rolling tax rate was 23.8 percent. See Note Regarding Use of Non-GAAP Financial Measures for additional information. |
Southwest Airlines Co. |
Condensed Consolidated Balance Sheet |
(in millions) |
(unaudited) |
| |||||||||||
June 30, 2025 | December 31, 2024 | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 3,475 | $ | 7,509 | |||||||
Short-term investments | 364 | 1,216 | |||||||||
Accounts and other receivables | 1,013 | 1,110 | |||||||||
Inventories of parts and supplies, at cost | 773 | 800 | |||||||||
Prepaid expenses and other current assets | 467 | 639 | |||||||||
Total current assets | 6,092 | 11,274 | |||||||||
Property and equipment, at cost: | |||||||||||
Flight equipment | 25,858 | 25,202 | |||||||||
Ground property and equipment | 8,656 | 8,244 | |||||||||
Deposits on flight equipment purchase contracts | 221 | 413 | |||||||||
Assets constructed for others | 88 | 88 | |||||||||
34,823 | 33,947 | ||||||||||
Less allowance for depreciation and amortization | 15,422 | 14,891 | |||||||||
19,401 | 19,056 | ||||||||||
Goodwill | 970 | 970 | |||||||||
Operating lease right-of-use assets | 1,243 | 1,369 | |||||||||
Other assets | 1,006 | 1,081 | |||||||||
$ | 28,712 | $ | 33,750 | ||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 1,811 | $ | 1,818 | |||||||
Accrued liabilities | 2,040 | 2,206 | |||||||||
Current operating lease liabilities | 323 | 328 | |||||||||
Air traffic liability | 6,696 | 6,294 | |||||||||
Current maturities of long-term debt | 22 | 1,630 | |||||||||
Total current liabilities | 10,892 | 12,276 | |||||||||
Long-term debt less current maturities | 4,081 | 5,069 | |||||||||
Air traffic liability - noncurrent | 1,600 | 1,948 | |||||||||
Deferred income taxes | 2,186 | 2,167 | |||||||||
Noncurrent operating lease liabilities | 915 | 1,031 | |||||||||
Other noncurrent liabilities | 1,038 | 909 | |||||||||
Stockholders' equity: | |||||||||||
Common stock | 888 | 888 | |||||||||
Capital in excess of par value | 4,247 | 4,199 | |||||||||
Retained earnings | 16,199 | 16,332 | |||||||||
Accumulated other comprehensive loss | (35) | (25) | |||||||||
Treasury stock, at cost | (13,299) | (11,044) | |||||||||
Total stockholders' equity | 8,000 | 10,350 | |||||||||
$ | 28,712 | $ | 33,750 |
Southwest Airlines Co. |
Condensed Consolidated Statement of Cash Flows |
(in millions) (unaudited) |
| ||||||||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||||
2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||||||||||
Net income | $ | 213 | $ | 367 | $ | 64 | $ | 137 | ||||||||||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||||||||||||||||
Depreciation and amortization | 400 | 404 | 795 | 812 | ||||||||||||||||||||
Impairment of long-lived assets | 8 | — | 8 | — | ||||||||||||||||||||
Unrealized/realized loss on fuel derivative instruments | — | 1 | — | 2 | ||||||||||||||||||||
Deferred income taxes | 66 | 110 | 23 | 43 | ||||||||||||||||||||
Gain on sale-leaseback transactions | — | — | (3) | — | ||||||||||||||||||||
Changes in certain assets and liabilities: | ||||||||||||||||||||||||
Accounts and other receivables | 90 | 34 | 146 | (274) | ||||||||||||||||||||
Other assets | 212 | 32 | 357 | 18 | ||||||||||||||||||||
Accounts payable and accrued liabilities | (95) | (576) | (220) | (1,473) | ||||||||||||||||||||
Air traffic liability | (606) | (317) | 55 | 798 | ||||||||||||||||||||
Other liabilities | 28 | (45) | (35) | (117) | ||||||||||||||||||||
Cash collateral provided to derivative counterparties | — | (20) | (22) | (20) | ||||||||||||||||||||
Other, net | 85 | (13) | 93 | (54) | ||||||||||||||||||||
Net cash provided by (used in) operating activities | 401 | (23) | 1,261 | (128) | ||||||||||||||||||||
| ||||||||||||||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||||||||||
Capital expenditures | (635) | (494) | (1,136) | (1,077) | ||||||||||||||||||||
Assets constructed for others | — | (6) | — | (16) | ||||||||||||||||||||
Proceeds from sale-leaseback transactions | — | — | 24 | — | ||||||||||||||||||||
Purchases of short-term investments | (319) | (1,532) | (370) | (3,210) | ||||||||||||||||||||
Proceeds from sales of short-term and other investments | 72 | 1,820 | 1,226 | 3,540 | ||||||||||||||||||||
Other, net | — | 6 | (3) | (28) | ||||||||||||||||||||
Net cash used in investing activities | (882) | (206) | (259) | (791) | ||||||||||||||||||||
| ||||||||||||||||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||||||||||
Payroll Support Program stock warrants repurchase | — | (6) | — | (6) | ||||||||||||||||||||
Proceeds from Employee stock plans | 15 | 15 | 32 | 30 | ||||||||||||||||||||
Repurchase of common stock | (1,500) | — | (2,250) | — | ||||||||||||||||||||
Payments of long-term debt and finance lease obligations | (2,592) | (8) | (2,598) | (16) | ||||||||||||||||||||
Payments of cash dividends | (103) | — | (210) | (215) | ||||||||||||||||||||
Other, net | 2 | 3 | (10) | (20) | ||||||||||||||||||||
Net cash provided by (used in) financing activities | (4,178) | 4 | (5,036) | (227) | ||||||||||||||||||||
| ||||||||||||||||||||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS | (4,659) | (225) | (4,034) | (1,146) | ||||||||||||||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 8,134 | 8,367 | 7,509 | 9,288 | ||||||||||||||||||||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 3,475 | $ | 8,142 | $ | 3,475 | $ | 8,142 |
NOTE REGARDING USE OF NON-GAAP FINANCIAL MEASURES
The Company's unaudited Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in
As a result, the Company also provides financial information in this release that was not prepared in accordance with GAAP and should not be considered as an alternative to the information prepared in accordance with GAAP. The Company provides supplemental non-GAAP financial information (also referred to as "excluding special items"), including results that it refers to as "economic," which the Company's management utilizes to evaluate its ongoing financial performance and the Company believes provides additional insight to investors as supplemental information to its GAAP results. The non-GAAP measures provided that relate to the Company's performance on an economic fuel cost basis include Total operating expenses, non-GAAP; Operating expenses, non-GAAP excluding Fuel and oil expense; Operating expenses, non-GAAP excluding Fuel and oil expense and profit sharing; Operating income, non-GAAP; Adjusted Operating income, non-GAAP; Other (gains) losses, net, non-GAAP; Income before income taxes, non-GAAP; Provision for income taxes, net, non-GAAP; Net income, non-GAAP; Net income per share, diluted, non-GAAP; Operating expenses per ASM, non-GAAP, excluding Fuel and oil expense and profit sharing (cents), Return on invested capital, non-GAAP; and Adjusted debt to adjusted EBITDAR. For periods in which fuel hedge contracts are utilized, the Company's economic Fuel and oil expense results differ from GAAP results in that they only include the actual cash settlements from fuel hedge contracts - all reflected within Fuel and oil expense in the period of settlement. Thus, Fuel and oil expense on an economic basis has historically been utilized by the Company, as well as some of the other airlines that utilize fuel hedging, as it reflects the Company's actual net cash outlays for fuel during the applicable period, inclusive of settled fuel derivative contracts. Any net fuel hedging premium costs paid related to option contracts that are designated as hedges are reflected as a component of Fuel and oil expense, for both GAAP and non-GAAP (including economic) purposes in the period of contract settlement. The Company believes these economic results provide further insight into the impact of the Company's fuel hedges on its operating performance and liquidity since they exclude the unrealized, noncash adjustments and reclassifications that are recorded in GAAP results in accordance with accounting guidance relating to derivative instruments, and they reflect all cash settlements related to fuel derivative contracts within Fuel and oil expense. This enables the Company's management, as well as investors and analysts, to consistently assess the Company's operating performance on a year-over-year or quarter-over-quarter basis after considering all efforts in place to manage fuel expense. However, because these measures are not determined in accordance with GAAP, such measures are susceptible to varying calculations, and not all companies calculate the measures in the same manner. As a result, the aforementioned measures, as presented, may not be directly comparable to similarly titled measures presented by other companies.
Further information on (i) the Company's fuel hedging program, (ii) the requirements of accounting for derivative instruments, and (iii) the causes of hedge ineffectiveness and/or mark-to-market gains or losses from derivative instruments is included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024. During second quarter 2025, the Company terminated its remaining portfolio of fuel hedging contracts, which were scheduled to settle through 2027, to effectively close its fuel hedging portfolio.
The Company's GAAP results in the applicable periods may include other charges or benefits that are also deemed "special items," that the Company believes make its results difficult to compare to prior periods, anticipated future periods, or industry trends. Financial measures identified as non-GAAP (or as excluding special items) have been adjusted to exclude special items. For the periods presented, in addition to the items discussed above, special items include:
- Incremental expense associated with contract ratification bonuses for various workgroups related to additional compensation for services performed by Employees outside the applicable fiscal period;
- Charges associated with tentative litigation settlements regarding paid short-term military leave to certain Employees, certain
California state meal-and-rest break regulations for Flight Attendants, and an arbitration award in favor of the Company's Pilots relating to a collective-bargaining matter; - Expenses associated with professional advisory fees related to the Company's implementation of its comprehensive transformational plan;
- Charges associated with severance, post-employment benefits, and professional fees as a result of the Company's reduction in workforce;
- Reversal of breakage revenue recorded in prior years related to a portion of flight credits issued to Customers during 2022 and prior that have either been redeemed or are expected to be redeemed in future periods. The majority of these flight credits were issued during the COVID-19 pandemic as the Company was making significant changes to its flight schedules based on fluctuating demand, which made it difficult to estimate future redemption patterns when compared against historical Customer behavior;
- Incremental expense associated with a voluntary separation program that allowed eligible Employees the opportunity to voluntarily separate from the Company in exchange for severance, medical/dental coverage for a specified period of time, and travel privileges based on years of service;
- Expenses associated with incremental professional advisory fees related to activist investor activities, which were not budgeted by the Company or associated with the ongoing operation of the airline;
- A charge associated with a settlement reached with the DOT as a result of the Company's December 2022 operational disruption; and
- Non-cash impairment charges to remove certain assets from the unaudited Condensed Consolidated Balance Sheet that are no longer in use.
Because management believes special items can distort the trends associated with the Company's ongoing performance as an airline, the Company believes that evaluation of its financial performance can be enhanced by a supplemental presentation of results that exclude the impact of special items in order to enhance consistency and comparativeness with results in prior periods that do not include such items and as a basis for evaluating operating results in future periods. The following measures are often provided, excluding special items, and utilized by the Company's management, analysts, and investors to enhance comparability of year-over-year results, as well as to industry trends: Total operating expenses, non-GAAP; Operating expenses, non-GAAP excluding Fuel and oil expense; Operating expenses, non-GAAP excluding Fuel and oil expense and profit sharing; Operating income, non-GAAP; Adjusted Operating income, non-GAAP; Other (gains) losses, net, non-GAAP; Income before income taxes, non-GAAP; Provision for income taxes, net, non-GAAP; Net income, non-GAAP; Net income per share, diluted, non-GAAP; Operating expenses per ASM, non-GAAP, excluding Fuel and oil expense and profit sharing (cents), Return on invested capital, non-GAAP; and Adjusted debt to adjusted EBITDAR.
The Company has also provided its calculation of return on invested capital ("ROIC"), which is a measure of financial performance used by management to evaluate its investment returns on capital. ROIC is not a substitute for financial results as reported in accordance with GAAP and should not be utilized in place of such GAAP results. Although ROIC is not a measure defined by GAAP, it is calculated by the Company, in part, using non-GAAP financial measures. Those non-GAAP financial measures are utilized for the same reasons as those noted above for Net income, non-GAAP and Operating income, non-GAAP. The comparable GAAP measures include charges or benefits that are deemed "special items" that the Company believes make its results difficult to compare to prior periods, anticipated future periods, or industry trends, and the Company's profitability targets and estimates, both internally and externally, are based on non-GAAP results since "special items" cannot be reliably predicted or estimated. The Company believes non-GAAP ROIC is a meaningful measure because it quantifies the Company's effectiveness in generating returns relative to the capital it has invested in its business. Although ROIC is commonly used as a measure of capital efficiency, definitions of return on invested capital differ; therefore, the Company is providing an explanation of its calculation for non-GAAP ROIC in the accompanying reconciliation in order to allow investors to compare and contrast its calculation to the calculations provided by other companies.
The Company has also provided adjusted debt, adjusted EBITDAR, and adjusted debt to adjusted EBITDAR (leverage), which are non-GAAP measures of financial performance. Management believes these supplemental measures can provide a more accurate view of the Company's leverage and risk, since they consider the Company's debt and debt-like obligation profile. Leverage ratios are widely used by investors, analysts, and rating agencies in the valuation, comparison, rating, and investment recommendations of companies. Although adjusted debt, adjusted EBITDAR, and leverage ratios are commonly-used financial measures, definitions of each differ; therefore, the Company is providing an explanation of its calculations for non-GAAP adjusted debt and adjusted EBITDAR in the accompanying reconciliation below in order to allow investors to compare and contrast its calculations to the calculations provided by other companies.
June 30, 2025 | |||||||
(in millions) | |||||||
Current maturities of long-term debt, as reported | $ | 22 | |||||
Long-term debt less current maturities, as reported | 4,081 | ||||||
Total debt, including finance leases (A) | 4,103 | ||||||
Add: Current operating lease liabilities, as reported | 323 | ||||||
Add: Noncurrent operating lease liabilities, as reported | 915 | ||||||
Adjusted debt (B) | $ | 5,341 | |||||
| |||||||
Twelve Months Ended | |||||||
June 30, 2025 | |||||||
Net income, as reported (C) | $ | 392 | |||||
Interest expense (income), net of capitalized interest, as reported | (201) | ||||||
Income tax expense (benefit), as reported | 114 | ||||||
Non-operating other (gains) losses, net, as reported | 13 | ||||||
Operating income, as reported | 318 | ||||||
Impact of special items | 227 | ||||||
Operating income, non-GAAP | 545 | ||||||
Depreciation and amortization | 1,640 | ||||||
Fixed portion of operating lease expense | 316 | ||||||
Adjusted EBITDAR (D) | $ | 2,501 | |||||
| |||||||
Total debt to Net income (A/C) | 10.5x | ||||||
Adjusted debt to adjusted EBITDAR (B/D) | 2.1x |
View original content:https://www.prnewswire.com/news-releases/southwest-airlines-reports-second-quarter-2025-results-302512434.html
SOURCE Southwest Airlines Co.